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The Effect of Tax Treaties on Multinational Firms: New Evidence from Microdata

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Author Info

  • Davies, Ronald B.

    ()
    (University of Oregon)

  • Norbäck, Pehr-Johan

    ()
    (Research Institute of Industrial Economics (IFN))

  • Tekin-Koru, Ayça

    ()
    (Oregon State University)

Abstract

This paper uses affiliate level data from Swedish multinationals to examine the impact of tax treaties on both overall affiliate sales and the composition of those sales. In line with previous results, we find little evidence for an effect of treaties on the level of total sales. We do, however, find that a tax treaty increases the probability of investment by a firm in a given country. In addition, we find that a treaty reduces exports to the parent but increases imports of intermediate inputs from the parent. This is consistent with treaties increasing the effective host tax. This suggests that tax treaties impact the behavior of multinationals along some dimensions but not along others.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 833.

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Length: 45 pages
Date of creation: 19 May 2010
Date of revision:
Handle: RePEc:hhs:iuiwop:0833

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Keywords: Tax Treaties; Multinational Firms; Foreign Direct Investment;

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References

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Citations

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Cited by:
  1. Egger Peter & Wamser Georg, 2013. "Effects of the Endogenous Scope of Preferentialism on International Goods Trade," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(2), pages 709-731, July.
  2. Mário MARQUES & Carlos PINHO, 2014. "Effects of Corporate Taxation and Bilateral Tax Treaties on European Multinationals’ Investment, 2005-2009. A Multi-Country Analysis," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 14(1), pages 33-44.
  3. Anken, F. & Beasley, J.E., 2012. "Corporate structure optimisation for multinational companies," Omega, Elsevier, vol. 40(2), pages 230-243, April.
  4. Nicholas Sly & Caroline Weber, 2013. "International Fiscal Policy Coordination and GDP Comovement," CESifo Working Paper Series 4358, CESifo Group Munich.
  5. Bruce A. Blonigen & Lindsay Oldenski & Nicholas Sly, 2014. "The Differential Effects of Bilateral Tax Treaties," American Economic Journal: Economic Policy, American Economic Association, vol. 6(2), pages 1-18, May.
  6. Norbäck, Pehr-Johan & Duanmu , Jing-Lin & Skedinger, Per, 2012. "Employment Protection and Multinational Enterprises: Theory and Evidence from Micro Data," Working Paper Series 935, Research Institute of Industrial Economics.
  7. Yuko Hashimoto & Konstantin Wacker, 2012. "The Role of Risk and Information for International Capital Flows," IMF Working Papers 12/242, International Monetary Fund.
  8. Arjan Lejour, 2014. "The Foreign Investment Effects of Tax Treaties," CPB Discussion Paper 265, CPB Netherlands Bureau for Economic Policy Analysis.
  9. Mishra, Anil V. & Ratti, Ronald A., 2014. "Taxation of domestic dividend income and foreign investment holdings," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 218-231.

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